The Urethane Blog
August 14, 2023
Cash reserves running out for many trucking firms, Werner says
Smaller firms could exit the market more frequently amid higher fuel prices and other costs as well as depressed volumes, according to industry players.
Published Aug. 14, 2023
David TaubeAssociate Editor
Dive Brief:
- Trucks will exit the market more quickly given depletions in cash, Werner Enterprises CEO Derek Leathers told investors on a Q2 earnings call, detailing the carrier’s ability to benefit from the reduced capacity.
- Executives with the carrier believe smaller trucking firms raked in cash amid 2022’s heyday, federal stimulus and lower fuel cost. But now that abundance of cash is now largely exhausted, Leathers said.
- Based on Werner’s internal analytics on how long the average carrier could stay afloat during the downturn, the TL provider thinks “those months are up,” spurring an “accelerated pace” of truck deactivations, Leathers said.
Dive Insight:
Federal data suggests that over 110,000 net deactivations have occurred for nearly a year, Werner reported.
Federal Motor Carrier Safety Administration data showed net truck deactivations for 44 consecutive weeks, Leathers said.
“Now they find themselves in an environment with rising interest rates and their finance costs are higher than ever,” said Leathers, who also serves as the carrier’s president and chairman.
Others are sharing similar observations.
Transportation tech services provider Motive, formerly KeepTruckin, reported that new carrier starts dropped below 10,000 in July, following a “trend of reverting to 2019 levels and marking a 29% decline since the beginning of the year,” according to a monthly economic report.
Many of those exiting fleets are now involving carriers with five or more vehicles, meaning the downturn is expanding beyond early stages when smaller firms were hit hardest, Motive reported.
Gene Graves of the United Shippers Alliance, an organization which negotiates rates with LTL providers and other transportation, projects hardships for carriers given Yellow’s demise and insurance increases.
“Every year there’s always a bunch of small LTL guys” exiting the market, said Graves, the alliance’s executive director. He added that the shakeout could be bigger than most years given the circumstances.
But amid the depressed volume, Graves foresees significant expansion from larger carriers.
“They’re gonna get bigger,” he said. “They have the capacity right now. They’re building new capacity.”
https://www.transportdive.com/news/fmcsa-net-deactivations-2023-trucks/690529/
August 14, 2023
Gulbrandsen commissions its new Tin Catalyst productionplant at its site in Dahej, India.
DAHEJ, GUJARAT, INDIA — August 14, 2023 — Gulbrandsen, a global specialty
chemicals leader, and one of the world’s largest producers of tin catalysts for the
polyurethane foaming industry, has completed the commissioning and safe start-up of
its new Tin Catalyst production plant at its site in Dahej, India. The unit will produce
Stannous Octoate and Stannous Neodecanoate.
Joerg Duebel, Global Business Director for Polyurethane Additives at Gulbrandsen,
commented on the occasion “Thanks to the well-coordinated efforts of our teams across
the globe, we completed the safe start-up of this unit ahead of schedule. This facility
will help us in meeting the growing demand for these products while also strengthening
our commitment to delivering high-quality catalysts to the polyurethane foaming
industry.”
About Gulbrandsen: Gulbrandsen is a manufacturer of industrial chemical
intermediates, fine chemicals and catalysts used in process industries. For more
information, please visit our website at www.gulbrandsen.com.
August 9, 2023
Stepan Company (SCL) Q2 2023 Earnings Call Transcript
Jul. 26, 2023 2:04 PM ETStepan Company (SCL)
Q2: 2023-07-26 Earnings Summary
EPS of $0.53 misses by $0.64 | Revenue of $579.98M (-22.84% Y/Y) misses by $89.88M
Stepan Company (NYSE:SCL) Q2 2023 Earnings Conference Call July 26, 2023 9:00 AM ET
Company Participants
Luis Rojo – VP & CFO
Scott Behrens – CEO, President & Director
Scott Behrens
Good morning, and thank you for joining us today to discuss our second quarter results. I plan to share highlights from our second quarter performance. I will also share updates on our key strategic priorities while Luis will provide additional details on our financial results. The company reported second quarter adjusted net income of $12.1 million. Earnings were significantly impacted by a 19% decline in sales volume versus the all-time record prior year second quarter due to continued demand softness across most of our markets and continued inventory destocking in certain market channels.
In the second quarter, margins in our Surfactant and Polymer segments were only slightly lower versus prior year as a result of less favorable mix, while unit margins for Specialty Products were significantly lower versus prior year due to high-cost inventory and pricing pressure. Gradual volume improvement throughout the quarter within our rigid polyol business was more than offset by destocking activity within our agricultural business. Cash expenses were slightly lower versus prior year due to proactive head count and discretionary expense controls implemented earlier in the year and lower accruals for incentive-based compensation.
For the quarter, adjusted EBITDA was $45.8 million versus $96.7 million in the prior year quarter, primarily driven by the decline in sales volume. Adjusted EBITDA in the second quarter of 2023 was slightly lower than the first quarter of 2023. Second quarter Surfactant operating income was $15.1 million versus $48.2 million in the prior year quarter, primarily due to a 15% decline in global sales volume. In addition, Unit margins were slightly lower due to less favorable product mix, high cost inventory carryover and increased competitive pricing pressure in Latin America.
Polymer operating income was $16.3 million, a decrease of $17.6 million versus the prior year. This decrease was primarily due to a 29% decline in global sales volume, including a 28% volume decline in Rigid Polyols. Specialty Product operating income was $3.8 million versus $9.9 million in the prior year. This decrease was primarily attributable to lower unit margins and sales volume within the medium chain triglycerides product line versus a record prior year.
Luis Rojo
Now turning to Polymers on Slide 7. Net sales were $164.5 million for the quarter, a 31% decrease versus the prior year. Volume decreased 29%, primarily due to a 28% volume decline in region volumes and lower demand in the specialty polyol and businesses. This was partially offset by volume growth in China. The lower demand reflect customer and channel inventory destocking and lower construction-related activities. Selling prices decreased 3% and foreign currency translation positively impacted net sales by 1%. Polymer operating income decreased $17.6 million versus prior year, primarily due to the 29% decrease in global volume. North America and Europe results were both impacted by lower volumes. Asia results improved on increased demand following the reopening of China.
Scott Behrens
Moving to Slide 10, Construction on our new alkoxylation production facility in Pasadena, Texas is approximately 35% complete and has surpassed 500,000 construction hours without an injury. The new estimated capital investment now stands at $265 million. We expect the Pasadena plant to be 90% complete by year-end and to start up in mid-2024. The underlying of consolation business that supports the Pasadena investment continued its strong double-digit volume growth in the first half of the year and at attractive margins.
Scott Behrens
Yes. Thanks, David. With regards to destocking, so the destocking obviously started to happen in Q1, definitely in the polyol side of our business for sure and in, I would say, all segments of our consumer products business. I think when you look back and try to appreciate how much inventory was stuffed throughout the channels. I don’t think anyone had a really good handle on it. What we can say going forward is in the rigid polyol business, we think that the destocking is predominantly behind us, and we’re now starting to get into a normal demand pattern for the second half of the year. I would say the same thing is true in consumer products. The destocking probably bottomed out in late April, May, and we’re now going to be entering a normal stabilized volume pattern going forward.
https://seekingalpha.com/article/4620083-stepan-company-scl-q2-2023-earnings-call-transcript
August 9, 2023
The rise and fall of a $500M company: A look at Klaussner’s shutdown
Sheila Long O’Mara//Executive Editor, Furniture Today//August 9, 2023
ASHEBORO – The news that 60-year-old Klaussner Home Furnishings is out of business shook the industry this week, leaving retailers scrambling for new resources and wondering how a company that had sales in excess of $500 million at one time could falter.
Founded in 1963 by Stuart Love as Stuart Furniture, the company announced its closing with an open letter on its website saying its lender was no longer willing to fund operations.
During its earlier days, the company grew into an upholstery powerhouse with its focus on quick-delivery sofa programs that are now a mainstay in the category. Love’s practice was to ship finished product to retailers a week after the order was placed, helping retailers cut down on their inventory loads. Under Love’s ownership, the company’s sales grew to $90 million. Furniture Today estimated Klaussner’s 2020 sales at $270 million, a 10% decline from estimated sales of $300 million in 2019. In 2009, Klaussner’s estimated sales were $500 million.
Former executive J.B. Davis joined the company in 1970, retiring 40 years later in 2010 as president and CEO. In 1979, Love sold Stuart Furniture to German furniture executive Hans Klaussner, and in 1986, the company’s name was changed to Klaussner Furniture.
In 2001, Klaussner expanded its product offering beyond upholstery to include case goods with the rollout of the Dick Idol collection, a licensed offering with the wildlife artist and sculptor.
Under Davis’ leadership, Klaussner Furniture grew quickly through acquisitions of companies such as upholstery producer Stylecraft and case goods resource JDI and by capturing considerable floor space at many of the biggest furniture retailers in the business.
The company also launched a high-end upholstery line called Comfort Design in 2009 and unveiled its Enso Bedding brand a year later.
Industry executive Bill Wittenberg succeeded Davis as president and CEO in 2010, and the following year, he led a management buyout of the company with Dave Bryant, chief financial officer at the time, from Hans Klaussner.
The new ownership also moved the company away from its Asheboro-based showroom where the company had traditionally shown new products during High Point Market, to its new 90,000-square-foot showroom located in the heart of the market district at 101 N. Hamilton St.
The company once again entered into a new category with its introduction in 2014 of outdoor furniture and later exited the category at the height of the COVID-19 pandemic in 2021.
Klaussner moved into the country music scene in 2015 when it signed a licensing agreement with Trisha Yearwood to design a whole home collection. Since that initial partnership, the company has introduced nine collections with Yearwood.
In 2017, private investment firm Monomoy Capital Partners acquired Klaussner. At the time of the announcement, the private equity group said the current management team would remain in place and maintain minority equity stake in the business.
At the time the company employed more than 1,800. As of yesterday, the company’s total employment was 884.
Two years after the Monomoy investment, Wittenberg transitioned to a strategic advisory role on the company’s board of directors, and Terry McNew took the reins as CEO.
McNew left the position last July, and Monomoy tapped David Cybulski for the job in August after serving first as the company’s chief financial officer and later in the interim CEO position.
August 8, 2023
Tempur Sealy International, Inc. (TPX) Q2 2023 Earnings Call Transcript
Aug. 03, 2023 2:47 PM ETTempur Sealy International, Inc. (TPX)
139.53K Followers
Q2: 2023-08-03 Earnings Summary
EPS of $0.58 beats by $0.02 | Revenue of $1.27B (4.85% Y/Y) beats by $29.20M
Tempur Sealy International, Inc. (NYSE:TPX) Q2 2023 Earnings Conference Call August 3, 2023 8:00 AM ET
Company Participants
Aubrey Moore – VP, IR
Scott Thompson – Chairman, CEO & President
Bhaskar Rao – EVP & CFO
Scott Thompson
Thank you, Aubrey. Good morning, everyone, and thank you for joining us on our 2023 Second Quarter Earnings Call.
I’ll start by sharing some highlights from our second quarter performance and then Bhaskar will review our worldwide financial performance in more detail. After that, I’ll share some closing comments before we open the call up for Q&A.
Today, we are pleased to report one of the strongest second quarters in the company’s history, second only to the same period in 2021. Importantly, these results were delivered against headwinds from a less-favorable market than we expected, the impact of which was partially mitigated by company-specific performance.
Sales growth for the quarter was 5%. Adjusted EPS for the quarter was consistent with prior years after absorbing higher interest costs, major launch costs and elevated taxes. GAAP EPS grew 2%. We believe these results are a reflection of our innovative products, strong sales culture, solid expense controls and our passion for execution.
In our largest market, the U.S., we believe industry units declined at least low double digits in the quarter, resulting in historically low aggregate industry volumes for the quarter and first half of the year. Overall, we believe the U.S. market has stabilized at trough unit levels, with the upper end of the market demonstrating a bit more resilience compared to the entry-level market.
Today’s results demonstrate the robust earnings power and cash flow attributes of the business, as we realized solid earnings and cash flow against this challenging backdrop. As we look to the back half of the year, we anticipate U.S.-produced mattress units trends will slowly improve but remain negative year-over-year. Bhaskar will have more information on the 2023 guidance in a minute.
Turning to a few highlights for the quarter. First, we continued to extend our lead as the largest global bedding company in the world. All 3 of our leading U.S. brands, Tempur, Sealy and Stearns & Foster performed well in the quarter, significantly ahead of where we believe the industry trended. We were pleased with the second quarter performance of our International business. The successful Tempur International launch combined with Dreams’ crisp retail execution are driving continued outperformance worldwide and positioning us well for the future.
Second, we opened our third domestic foaming pouring plant in Crawfordsville, Indiana, expanding our manufacturing capacity to meet expected demand for years to come. We designed the state-of-the-art facility to optimize our manufacturing capabilities across bedding products and components. In addition to pouring Tempur-Pedic material, we have the flexibility to leverage the plant’s foaming pouring capacity to manufacture bedding products and components for our Sealy and Stearns & Foster brands as well as our non-branded OEM operations.
The facility enhances our ability to service our customers in the Northeast market, creating opportunities to shorten lead times and reduce per-unit logistics costs. This plant also provides additional storage for chemicals, mitigating the risks of future supply or pricing disruption.
With the opening of this facility, we’ve completed our 3-year strategic CapEx program and expect to see CapEx investments moderate significantly going forward. In the second half of this year, we expect CapEx to be down by 50% versus the same period last year, certainly beneficial to free cash flow.
Third highlight. We completed the rollout of our new TEMPUR-Breeze products and our new smart base in the U.S. Next-generation TEMPUR-Breeze mattress builds on the success of our proven legacy Breeze products to deliver next-level sleep solutions with enhanced Tempur-Pedic feel characteristics. Featuring new technologies designed by our Tempur-Pedic scientists, the new lineup presents the next generation of consumer-centric solutions focused on helping to alleviate aches and pains.
We also continue to raise the bar in cooling performance with our new LuxeBreeze model, dealing 10 degrees cooler all night long, presenting the best-in-class solution for the more than 60% of the households that have at least one person who sleeps hot. Retailers’ and consumers’ response to these incremental technologies have been overwhelmingly positive, and we and retailers are seeing positive mix and higher average ASP.
In tandem with the Breeze mattress refresh, we also introduced an updated adjustable base lineup, which is driving all-time-high retailer advocacy and attachment rates, reaching new records in May and June. Our new smart base features, our new Sleeptracker 2.0 technology, the accuracy of which was validated by a Stanford medical study; and offers industry-leading automatic snore detection and response, addressing a leading sleep concern among consumers. This new lineup also features incremental multisensory relaxation features to help consumers wind down and prepare their bodies and minds for deep, rejuvenating sleep.
Over the Memorial holiday, we supported these Tempur lineups with all-new breeze and smart-based multimedia advertising campaigns. These efforts drove incremental search interest in Tempur year-over-year and drove solid e-commerce traffic trends over the Memorial Day selling period. All of our new Tempur products and supporting advertising initiatives are strengthening Tempur’s appeal to the premium wellness-minded consumer and driving improvements in attach rates and ASP for our third-party retailers.
Fourth highlight. Our investments in Stearns & Foster products, distribution and marketing continue to drive meaningful sales growth and expand brand recognition. In the second quarter, Stearns delivered its third sequential quarter of year-over-year sales growth, significantly outperforming broader market trends. This was possible, thanks to the recent investments in brand and the rollout of our all-new Stearns & Foster collection with superior innovation and elevated design and enhanced step-up opportunities.
The new product lineup is delivering strong results. We have grown Stearns’ third-party retail distribution by more than 20% compared to the previous collection with gains in both legacy and incremental Stearns’ retailers. We’re seeing this product resonate with historically underserved premium innerspring consumer, resulting in strong mix and again driving ASP expansion.
Our channel diversification strategy is also driving strong brand momentum. The Stearns & Foster e-commerce site we launched last year continues to drive brand recognition and highly profitable incremental sales.
Finally, our launch of our all-new international Tempur products continue to track with our expectations. We are launching the new international lineup in over 90 markets worldwide. In the first half of the year, we kicked off our Tempur European and Asian markets. We expect to be fully floored in our last market in the U.K. in the first half of 2024.
The U.K. has some country-specific fire retardant regulations, which adds some complexity to the product launch. The consumer-centric innovation and new collection will appeal to our legacy ultra-premium consumers at prices of 3,000 and above but also broadening our price points to expand our addressable market to meet the needs of consumers shopping for mattresses between 2,000 and 3,000.
We are streamlining the manufacturing process with this lineup to unlock this incremental price point without materially altering the margin profile of our Tempur International business. As we continue to stagger the rollout by individual markets, we are currently manufacturing both with new line and the old line of products in our international Tempur plant. We plan to optimize production of the new line after the transition period, providing a tailwind to gross margins in 2024.
Scott Thompson
Thanks, Bhaskar. Great job. Before opening the call up for questions, I want to provide a couple of updates. First, I want to address the cybersecurity event affecting certain parts of our IT system, which was disclosed Monday in our 8-K. Following the discovery of the event, our team activated its CEO-approved incident response and business continuity plan.
The plan was approved years ago and is designed to contain incidences. The plan included proactively shutting down certain IT systems, resulting in the planned temporary interruption of our operations. We began bringing our systems back online last Friday and expect it to take time to return to normal operations.
Our investigation remains ongoing and we continue to work to determine the impact of the disruption. If we determine that any personal information was involved, we would, of course, comply with any reporting obligations we have under the applicable law. Currently we’re working hard to catch up with the lost production from the shutdown. In total, our systems were down for a week, and we are currently working to get back to full production. We expect cyber-related expenses net will be adjusted from our third quarter financial results.
Lastly, I’d like to provide a brief update on our pending acquisition of Mattress Firm. We’re currently responding to the Federal Trade Commission’s second request and continue to expect to close the transaction in mid- to late 2024. Over this interim period, Mattress Firm’s leadership team provides us with a high-level update of their financial performance. Mattress Firm’s recently — quarterly results, which they reported yesterday, were consistent with our expectations. And we look forward to bringing the Mattress Firm team onboard.
Robert Griffin
Our first one is to just maybe follow up on the guidance reduction and just maybe get a little more clarity on some of the moving parts assumed in there. So is the reduction in earnings and sales all just a function of the industry maybe being a little bit softer than we originally anticipated and we laid out? Or are you baking in some conservatism that this IT event or the cyber event will have some type of impact on earnings and revenue in the second half?
Scott Thompson
Yes, let me — it’s kind of a — let me answer it because it’s a little bit of a long answer, but let me be clear about it. First of all, from the cyber event, great job by the IT, internal IT department. They did a great job. In fact, it was an enterprise-wide effort. And congratulations to all the people internally. We also had a lot of help from external IT teams that we had on retainer for these kind of events and a great job by Microsoft’s elite team.
Let me go — kind of go through the estimates of what we know today. Obviously, this is not an easy estimate, but let me tell you what we know based on all the information that we have right now. First of all, the event itself is certainly not material to the intrinsic value of the enterprise. The event is not material to our 2023 expected sales or EBITDA.
Before insurance — and we have an insurance limit of $5 million, but before any insurance, our best estimate is about $10 million to $20 million negative impact in EBITDA in the third quarter. We expect the vast majority will qualify as an add-back adjustment in the third quarter. In the estimate that I gave you on the impact of EBITDA, it really breaks out into kind of 2 pieces, 1 which is clearly incremental costs related to the activity and should be cleared by — covered by insurance at some point, but of course, we’ll account for that as we receive it. And then 50% of it is from potential lost sales.
When you look at the potential lost sales for the third quarter, you’re talking about $20 million to $30 million. That’s about maybe 2%-ish, give or take, of the quarter sales; and again that’s potential. And the vast majority of that would be Sealy U.S., okay, because we have plenty of inventory in the Tempur organization. We’ve not experienced any material changes in our balance of share. And retailers, quite frankly, have been very understanding in the situation.
Now lastly, more kind of directly to your guidance question. For the 2023 guidance, the event has been considered, but as we mentioned before, we would expect an add-back in the third quarter for the costs. And certainly we’ll account for the — like I said, the insurance. Whenever we ever file a claim, we’ll call that out.
Any other impact on changing the guidance, totally macro. When you look at the second quarter and — okay, well, let’s say we kind of scraped out the second quarter. The market wasn’t as strong as we expected it to be, but we also performed better and outperformed the industry by a greater extent than we expected. And when you net the two, we had it relatively solid, in fact very solid, relative to others in the industry in the second quarter. And looking forward, we brought back — we brought down our expectations for the industry; and that required us to fine-tune 3%-ish from a guidance standpoint.
Susan Maklari
Yes. I think staying on the theme of demand, Scott. As you think about the macro setup with rates possibly at or very close to the peak, housing getting a little better, it feels like maybe the consumer will start reengaging and spending in some of these other categories as travel starts to moderate a bit in there. How are you thinking about the industry’s ability to start to see some level of improved demand as we move through the next couple of quarters; and your ability to continue to outperform relative to that as some of your peers perhaps move up off of these industry declines of the 25%, 30% range?
Scott Thompson
Thank you for the 33 questions you asked me, Susan. Let me speak to it and see if I can answer like 30 and leave 3 unattended. First of all, yes, we’re very happy with the performance in the quarter. We think it gives us an opportunity to show the strength of the business even in a little bit of a down cycle in its cash flow generation. I would highlight in our numbers, because this goes to the consumer question you asked. If you look at our ASP, it was up 13% in the quarter. And all but about — let’s call it 2% of that is price.
The vast majority of that is people mixing up. And so what that would tell you is the top end of the consumers are doing very well and where you’re seeing sales pressure is at the lower end. If I do it by brand standpoint, our high-end brands did better than our low-end brands. i.e., Stearns & Foster did better than Sealy. And Stearns & Foster grew double digits in a market that — I don’t know, pick your number, but it was clearly down double digits. It grew double digits.
So I’m going to say the strength of the high-end customer everywhere we looked, looked very good. We look at individual mattresses within the Tempur lineup. The high-end Tempur products did much better than the low-end Tempur products. So we’re — we continue to be fairly bullish on a high-end customer. Where you feel the pressure is in the low end, and the low end is — has gotten hit very hard.
So you had a question in there about outlook, as far as consumers going forward. We’ve been bouncing around the bottom in the bedding industry for probably 3 quarters, and so I don’t know. Next quarter or 2, we certainly think that the industry should start doing better. Some people can point to green shoots. Yes, we see some, but you have some good weeks and you have some slower weeks. But the main thing from our perspective is we see our products incrementally performing very well in the marketplace against the competition. And part of her question, I missed, Bhaskar, that you can remember?
Keith Hughes
Yes. You had talked earlier about raw material costs, I guess, coming down [indiscernible]. Can you give me a kind of quantification how much they’re down either in the quarter or your estimates for the second half of the year?
Bhaskar Rao
Sure. So let me think about it this way. Is that we did have an expectation from a commodity standpoint as we entered the year. Largely speaking is that those commodities are coming in very much in line with those — with our expectations. We would expect to continue to see incremental commodity benefit as we get into the back half; however, all contemplated in our initial thoughts as it relates to what we thought commodities were going to do. As it relates to the commodity benefit that we saw in our GP rate, is we’ll have a little bit more information in our queue. It’s going to drop here in a little bit, but I’ll go ahead and give you a peek on it. It’s from a commodity standpoint is what we’d want to expect to see is about 150 basis points of improvement.
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